Category: financial services

Police in Lower Pottsgrove, Pennsylvania have spotted a group of thieves who are placing completely camouflaged skimmers on top of credit card terminals in Aldi stores. The skimmers, which the gang placed in plain sight of surveillance video cameras, look exactly like the original credit card terminals but would store debit card numbers and PINs of unsuspecting shoppers.

“While Aldi payment terminals in the United States are capable of accepting more secure chip-based card transactions,” writes security researcher Brian Krebs. “The company has yet to enable chip payments (although it does accept mobile contactless payment methods such as Apple Pay and Google Pay). This is important because these overlay skimmers are designed to steal card data stored on the magnetic stripe when customers swipe their cards.”

Interestingly, commenters reported that many Aldi stores support chipped EMV credit cards but that they would often tape over the slots and ask users to swipe instead.

“The Aldi stores near me got chip readers early last year with Apple Pay and everything enabled. After ~5 months they taped over the card insertion slot and now require customers to swipe again,” wrote one commenter. “I asked one of the managers and he said corporate required them to switch back because ‘swipes are faster.'”

I love these stories primarily because point of sale terminals are widely unguarded and offer the best of security theatre – you think you’re safe because they look like the egg sacs of some armored beast but, with a quick addition of a skimmer, you create something that is deeply unsafe. That this skimmer ended up at a town of just 12,000 souls is particularly poignant.

Police in Lower Pottsgrove, Pennsylvania have spotted a group of thieves who are placing completely camouflaged skimmers on top of credit card terminals in Aldi stores. The skimmers, which the gang placed in plain sight of surveillance video cameras, look exactly like the original credit card terminals but would store debit card numbers and PINs of unsuspecting shoppers.

“While Aldi payment terminals in the United States are capable of accepting more secure chip-based card transactions,” writes security researcher Brian Krebs. “The company has yet to enable chip payments (although it does accept mobile contactless payment methods such as Apple Pay and Google Pay). This is important because these overlay skimmers are designed to steal card data stored on the magnetic stripe when customers swipe their cards.”

Interestingly, commenters reported that many Aldi stores support chipped EMV credit cards but that they would often tape over the slots and ask users to swipe instead.

“The Aldi stores near me got chip readers early last year with Apple Pay and everything enabled. After ~5 months they taped over the card insertion slot and now require customers to swipe again,” wrote one commenter. “I asked one of the managers and he said corporate required them to switch back because ‘swipes are faster.'”

I love these stories primarily because point of sale terminals are widely unguarded and offer the best of security theatre – you think you’re safe because they look like the egg sacs of some armored beast but, with a quick addition of a skimmer, you create something that is deeply unsafe. That this skimmer ended up at a town of just 12,000 souls is particularly poignant.

Today was supposed to be the deadline for Equifax’s free credit freeze offering, but the company has decided to extend the service to consumers for another five months. Now, Equifax customers can request a credit freeze through June 30.

Still, January 31 is the last day to cash in on free credit monitoring through Equifax’s TrustedID Premier program, assuming you still trust the company that failed to protect the personal data of 143 million users enough to rely on it.

Users who freeze their credit report through Equifax should also look into doing so at Experian and TransUnion, the other two major credit bureaus. Choosing to freeze your credit reports is a useful if imperfect tool for anyone concerned that their accounts or identifying information (social security numbers, birth dates, etc.) might be compromised, but it can prevent would-be identity thieves from opening a line of credit or a loan in your name.

Equifax is also introducing a new credit locking service called Lock & Alert, made available today (and free for life) in app form. It may sound redundant, but a lock and a freeze are two different services. As the company explained to CNN Money, a credit freeze can only be lifted with a pin number, while a credit lock uses “modern authentication techniques, such as username and passwords and one time passcodes for better user experience.” The Lock & Alert app is available now through the App Store and through Google Play.

All the attention in financial services this year has gone to the newest kids on the block: cryptocurrencies. With Bitcoin now eclipsing $15,000 and Coinbase adding more than 300,000 users in one week alone, it’s easy to see why.

While cryptocurrencies stole the spotlight, a clutch of companies were quietly working behind the scenes to slowly bring the financial services establishment to its knees. It may turn out that these startup entrants of the last several years will prove to be the more relevant disruptors.

Earlier this year the “FinTechs” hit a massive milestone, one that very few people noticed but which must certainly be keeping senior execs at banks, credit card companies, and other institutions up at night. In June of 2017, for the first time in history, the top 10 publicly traded U.S. FinTechs surpassed $100 billion in total market capitalization.

Now that number is over $130 billion, and there are another dozen privately held FinTechs in the U.S. collectively valued at almost $35 billion. Together this is nearly $175 billion of value that didn’t exist 20 years ago. Other recent artifacts that must surely be unsettling for the incumbent financial institutions include: Paypal’s market cap surging past that of Amex and Robinhood quickly closing in on E*Trade in terms of total number of accounts opened — in just three years.

With an eye towards tracking the progress of disruption in the financial services space, we’re excited to release the Matrix U.S. FinTech Index. This index is a market-cap weighted index that tracks the progress of a portfolio of the 10 leading public FinTech companies listed above over the course of the last year (beginning in December of 2016). For comparison, we have also included another portfolio of the 10 largest financial services incumbents (companies like JP Morgan, Visa and American Express) as well as the S&P 500 index.

As seen below, the Matrix FinTech Index shows a clear win for the FinTechs. To their credit, after a rough year in 2016, the incumbents rallied in 2017 to perform slightly better than the S&P 500 Index — yielding 29% returns over the one year period (compared to the 20% returns by the S&P 500 Index).

The FinTechs, however, have blown by this, delivering 89% returns and handily beating the incumbents by 60 percentage points. If you had invested in the Matrix FinTech Index a year ago, you would have almost doubled your money in just one year.

This Is Just the Beginning

Unfortunately for the incumbents, the outlook only worsens from here. The “old-guard” has long been suffering from inflexible back-end systems, antiquated ways of serving customers, and human intensive processes. They’re also increasingly at risk of losing trust with consumers as a result of very public failures like the Wells Fargo scandal and the Equifax data breach.

In the next 10 years, we predict that the incumbent’s portfolio returns (shown above in red) will drop well below the S&P 500 as they continue to disappoint end consumers and cede ground to the FinTechs.

Meanwhile, the FinTech takeover has just begun—financial services in recent years has been 7-9% of U.S. GDP (i.e. trillions of dollars). In the decade to come, we will see the Matrix FinTech Index continue to climb to new heights as the existing FinTechs surge in value and as we add many more FinTechs to the Index. In fact, the nearly 100% growth we’ve seen in the last year is the bottom end of the hockey-stick, just hitting the inflection point. By 2027, as we accelerate up the hockey stick, every aspect of financial services, from payments to lending to investing will be dominated by FinTechs.

Move over financial services – the FinTechs are here and they aren’t going anywhere anytime soon.

A who’s-who of celebrities, investors, and celebrity investors have come together to invest $47 million into Aspiration, the company launched by a former speechwriter for President Bill Clinton to challenge the traditional banking industry.

For Andrei Cherny, Aspiration’s founder and chief executive, the company’s business is an inversion of the business model of the typical modern bank.

“The problem with how banks make money off of most people is that often times banks make money when the consumer fails,” says Cherny.

Everything from overdraft fees to late payment fines to ATM fees are the cash cows for retail banks, says Cherny. “Those moments when the customer is feeling pain is when the banks make their money,” he says. But they also make money off of selling products that consumers don’t actually need (and in the case of Wells Fargo, those banks might not even sell you a product).

It’s in this environment that Cherny saw the opportunity for a new kind of bank. One that would cater to a customer that is concerned with where their money is being invested by their financial institution and how their financial institution treats its customers.

Marshaling Hollywood celebrities and athletes from the Los Angeles community, along with some of the biggest names in finance, Cherny was able to pull together what he says is the largest Series B in financial technology investment history for an online banking company in the U.S.

The core product for Aspiration is its Summit personal banking account. The checking account provides 1% interest and is fossil fuel free. The checking account also lets its banking customers track their sustainability score by monitoring where they spend money and checking it against a sustainability monitoring and scoring system that Aspiration created (the scoring mechanism tracks companies’ corporate social responsibility on a number of different metrics).

“If we can start driving people to spend in a way that puts ethics at the core of their daily spending decisions you can totally transform the incentives that companies have when it comes to how they treat the environment and how they treat their employees,” Cherny said of the monitoring program.

So far, Aspiration has accounts totaling $350 million in savings, with about $2 billion per-year now transacted across the Aspiration platform, Cherny told me.

Unlike other banks, Aspiration makes money by charging a fee set by the customer for the services they use. “What we see is that the vast majority of customers are choosing to pay across all products and most choosing to pay a very fair amount,”Cherny said. The online bank also offers investment and retirement services.

Cherny said the new capital would be used to help develop a new suite of credit and ending products to further build out its array of banking services.

For Cherny, all of this can be placed in the context of the current political environment. “People understand that in the absence of positive leadership from Washington that they have not only more personal responsibility but they have a huge amount of individual power. When, as individuals we’re spending $36 billion a day, the individual decisions that we make can add up to an enormously powerful lever even if government doesn’t step in in a positive way.”

When customers pay fees for banks and financial services firms, a large portion of that money goes into lobbying for things that are beneficial to the financial services community and few other people.. or the country at large. Financial services firms actually spend three times as much money as the next biggest spender on lobbying for the federal government.

Beyond the prompts it gives to its customers about their spending habits, Aspiration is one of the most charitable financial firms in the country, giving out 10% of its earnings to charitable micro-loans and mentorship programs for low-income Americans, the company said.

“Aspiration has seen astonishing growth in just a couple of years and we’re convinced this is just the beginning of an even bigger trend,” said Ibrahim AlHusseini, Managing Director of Social Impact Finance, which led the company’s latest round of funding. “Consumers are ‘voting with their money’ now more than ever, which means they are increasingly investing in companies that share their values. Aspiration is the world’s leader in bringing this spirit of investing with a conscious to the financial services industry.”

In a huge win for the early stage financial services startup Tala (and for the Los Angeles tech ecosystem), Uber‘s former data chief, Kevin Novak has agreed to join the company as its Chief Data Officer.

Novak’s achievements at Uber can’t be understated. He was the inventor of dynamic pricing, created the UberFreight business and built the foundation of the company’s current data organization.

Now, Novak will be working with new sets of data that have the potential to radically transform yet another industry — financial services.

Tala, which has originated and delivered 4 million loans for over $190 million, has had a banner year already. The company raised $30 million in financing to start off 2017 and has launched in two new geographies –Tanzanian and the Pilippines — after beginning in 2014 as a smartphone-based lending app in Kenya.

The company also scored another key hire in September when former CapitalOne and Barclay Card executive, Gaurav Bhargava, joined the team.

Tala uses data from Android devices and online behavioral data (think Facebook activity, etc.) to underwrite would-be borrowers who have no formal credit history. It’s among a number of companies looking to serve the under-banked with new scoring models to facilitate loans.

The potential market for these services is huge. Tala, and other companies like it, face a population of two billion people who have no formal credit score and three billion who are considered to be underserved by current financial services companies.

For Shivani Siroya, Tala’s chief executive, the attraction for Novak was the company’s mission as much as any potential compensation. “He was actually debating joining other companies. He was incredibly sought after,” she said. “Helping, alongside me, leading this global vision was an important part of selling him.”

That global vision expands far beyond the credit business that’s been the company’s foundation. “We don’t consider ourselves a credit company,” said Siroya. “We are using data and applying that data … This is all about how you understand the customer. I couldn’t think of someone better, in terms of both the vision that we have and the capabilities that we need than Kevin.”

Ultimately, the plan is to expand into insurance products and savings accounts for the underbanked in addition to the credit products.

While Novak’s talents are indisputable, his background at Uber was not an unqualified benefit, according to people familiar with the hiring process. People at the company, aware of the problems that bedeviled Uber’s management, did due diligence to ensure that their new executive hire would be a good cultural fit.

“We fully vetted the guy,” says one person familiar with the process. “He did not get any concessions because he was the former head of data science at Uber.”

Novak seems to be nothing but enthusiastic about the opportunity at Tala.

“Tala is working with one of the most exciting data sets imaginable, and with the goal of building financial services that include more of the world’s people,” said Novak, in a statement. “I’m blown away by the team’s passion and commitment and by the great work already underway. I look forward to working with Tala’s existing data scientists and global teams to guide the company’s next chapter.”

Novak’s hire is significant not just for Tala, but as a signifier of the strength of the broader technology ecosystem in Los Angeles, according to investors in the community.

“What’s meaningful is you’re getting these high profile recruiting wins to LA… and it’s not just from Snap or some other media business, but from a startup that’s solving larger-scale, real world social and technical problems,” says Arteen Arabshahi, a principal at Fika Ventures.

Indeed, Los Angeles is home to a number of compelling startups that are tackling problems beyond e-commerce and entertainment. Novak’s presence can only help — not just as an operator, but as an advisor to this growing community of entrepreneurs.